Holidays Act reform

Direction of the reform

The Government is aware of issues with the Holidays Act and that these have been a longstanding concern for workers, employers and payroll providers. Resolving these issues is a priority for the Government.

In December 2024, officials were directed by the Minister for Workplace Relations and Safety to take a new approach to reforming the Holidays Act, with a focus on simplicity, improving workability and reducing compliance costs. The approach involves designing an hours-based accrual model for annual leave and considering whether other models may be best-suited for more complex work arrangements.

The Minister’s direction followed the completion of targeted consultation on a draft Bill with proposed reforms to the Holidays Act. The targeted consultation sought feedback on the technical and policy details of the draft Bill, and on alternative options to improve its simplicity and workability. 

Many participants indicated that the general framework of the draft Bill is not a significant improvement on the current Holidays Act and that more fundamental changes to the leave system would better address the longstanding issues with the Holidays Act. Key reasons given included complexity, compliance costs and workability for those with variable work arrangements. 

Read the Minister’s December 2024 announcement:

Minister response to consultation on Holidays Act replacement(external link) — Beehive.govt.nz

Read the Minister’s announcements leading to the targeted consultation:

• June 2024:
  Progress for fixing the Holidays Act 2003(external link) — Beehive.govt.nz
• September 2024:
  Milestone reached for fixing the Holidays Act 2003(external link) — Beehive.govt.nz

Next steps

Officials from the Ministry of Business, Innovation and Employment (MBIE) are currently working to design the details of the new approach.

The Minister intends to seek Cabinet decisions on the new approach in 2025, once the details have been designed. There will be an opportunity for all stakeholders to provide input on the Bill once it is introduced and considered by Select Committee.

What employers can do to prepare for the changes

Until any changes to the Holidays Act go through the Parliamentary process and come into force, all of the existing rules still apply. This means that employers still need to comply with the current Holidays Act, and ensure they are providing the correct entitlements and payments to employees.

Additionally, employers retain an obligation to remediate employees for historical underpayments that have occurred due to non-compliance with the current Holidays Act.

Leave entitlements under the current Holidays Act(external link) — Employment New Zealand

There will be an implementation period between when a Bill is passed and when it comes into force. The targeted consultation included a question about what a reasonable time would be for the required system changes to be made. The Government will consider this feedback before final policy decisions are made.

MBIE intends to ensure that information about any changes to the Holidays Act is available to employers, employees and payroll providers as soon as practical after a Bill is passed, and before it comes into force.

Who you can contact

If you have a general question about rights and obligations related to leave and holiday entitlements you can find information for employers and employees on the Employment New Zealand website. 

Employment New Zealand(external link) 

If you cannot find the information you need, you can email your query to Employment New Zealand.

Email us a query(external link) — Employment New Zealand

If your questions are urgent, call 0800 20 90 20.

If you have questions about whether your current or former employer has calculated your leave payments correctly, or if you believe you may be eligible for a remediation payment, contact your employer in the first instance. Many employers have webpages about their Holidays Act remediation programmes which include contact details for employees. 

If you have seen or suspect a breach of employment standards you can report it to the Labour Inspectorate.

Labour Inspectorate complaints(external link) — Employment New Zealand

If you have specific questions about the Holidays Act Review, email holidays.act.review@mbie.govt.nz 

Targeted consultation on a draft Bill 

The Government undertook targeted consultation in September 2024 on a draft Bill with proposed reforms to the Holidays Act. The targeted consultation sought feedback on the technical and policy details of the draft Bill, and on alternative options to improve its simplicity and workability. 

Participants in the targeted consultation included stakeholders comprising employers, employees, and technical experts, across various industries, sectors, and population groups. MBIE selected the participants from those who registered interest in participating in June 2024. 

The draft Bill included some changes and additions to the previous Government’s decisions. The main focus of these was to simplify the calculations and reduce the cost of implementing them for employers. It also reflected the Government’s decision to take a pro-rata approach to sick leave entitlements.

The exposure draft Bill included:

• a proposed approach to pro-rating sick leave so that there is some proportionality to how much an employee works
• moving from a weeks-based entitlement system to a weeks-based accrual system for providing annual leave entitlement
• simpler methodologies for calculating use of leave that do not require pay systems to access data about daily hours of work
• objective criteria for using pay-as-you-go for annual leave and a less burdensome review process, and
• simplifying the payment method for other types of leave so that only one calculation is required.

Record of the work completed by the previous Government before the 2023 General Election

The purpose of the Holidays Act Review

The Government established the Holidays Act Taskforce to suggest improvements to the Holidays Act, following a joint request from unions and employers.

The Taskforce was asked to make recommendations on options for a clear and transparent set of rules for providing entitlements to, and payment for, holidays and leave.

The Taskforce’s objectives were to:

• recommend changes that address the high degree of ambiguity that has made the Holidays Act difficult to understand and implement for employers
• make it easier for employees to understand their entitlements.

The Taskforce’s recommendations

The Holidays Act Taskforce made 22 recommendations which were jointly agreed to by union and business representatives. The Government accepted the Taskforce’s recommendations.

The new legislation that will implement the Taskforce’s recommendations will provide clear methods that employers can use to accurately calculate and pay leave entitlements. It will also include some changes to employees’ leave entitlements and introduce greater transparency to ensure employees are fully informed about their leave entitlements.

The recommendations included:

Clear methods, formulas and tests

• New methods that employers must use to calculate the amount of leave entitlement an employee uses when they take leave. This will include a formula for calculating leave for employees with variable working arrangements.
• New leave payment formulas and definitions to provide greater clarity about what payments must be included in the calculations. This will include a new definition of gross earnings and a new Ordinary Leave Pay calculation to replace Ordinary Weekly Pay and Relevant Daily Pay. 
• New eligibility tests for Family Violence, Bereavement and Sick leave.
• A new ‘Otherwise Working Day’ test for determining days on which these entitlements apply. 
• A new test for when an employee may receive their annual holiday entitlement on a ‘Pay-As-You-Go’ basis and clear rules for reviewing whether it can continue to be used throughout the course of employment.

Increased access to some leave entitlements

• From their first day of employment, eligible employees will be entitled to bereavement leave and family violence leave, and to begin accruing sick leave. Other employees will be eligible after 3 months if they meet the new tests.
• Employees will be able to take annual holidays on a pro-rata basis in advance of their entitlement.
• Bereavement leave will be expanded so that employees can access 3 days of leave for more types of family members.
• Employees returning from parental leave will be paid according to the normal rules for annual holidays, rather than their pay only being based on their average weekly earnings over the last 52 weeks.

Greater transparency for employees

• New, clearer requirements related to the process for having a closedown period. 
• Additional record-keeping requirements to ensure employers have the data required to accurately complete the calculations and tests. 
• A requirement to provide a pay statement in each pay period to provide greater transparency about leave and pay for employees.

Read the Minister's announcement accepting the Taskforce’s recommendations(external link)

Read the full Holidays Act Taskforce final report [PDF, 1.4 MB]

Work progressed to implement the Taskforce’s recommendations

Detailed policy design work was completed

MBIE has completed a policy design process to develop the details required to implement the Holidays Act Taskforce’s recommendations in legislation.

To support this process, MBIE brought together a working group of stakeholders including payroll system providers, payroll practitioners working in employer organisations, business, and unions.

The group contributed their insights into the practicalities of implementing the recommendations in payroll systems, and across a variety of complex employment environments.

Those insights informed some refinements to the Taskforce’s recommendations to address areas where the group identified gaps and opportunities for simplification.

The objectives of the refinements were to help ensure the new rules and processes for calculating leave entitlements and payments are definitive, clear, and logical, can be systematised, and are workable in all employment situations.

All of those refinements were consistent with the intent of the Taskforce’s recommendations.

Drafting of a Bill began

Drafting of legislation to implement the Taskforce recommendations and refinements began before the 2023 General Election but a Bill was not introduced.

The Government considered it was important that time was taken to get it right first time in order to minimise the risk of implementation challenges and future compliance issues.

Background documents

Establishing the Taskforce

(The Minister for Workplace Relations and Safety made a minor amendment to paragraph 9 of the terms of reference.)

Holidays Act Taskforce members

The table below outlines the individual members of the Holidays Act Taskforce and which organisation they were representing.

Holidays Act: Issues paper

In August 2018, the Taskforce published an issues paper that set out its understanding of the key issues that employers, employees, and payroll providers face in trying to implement the Holidays Act 2003. The Taskforce considered feedback from stakeholders on the issues paper as it developed its final recommendations.

Interim report from Holidays Act Taskforce

In December 2018 the Taskforce provided an interim report to the Minister for Workplace Relations and Safety on progress with the review of the Holidays Act.

Accepting the Taskforce’s recommendations